Current Assets of a Company were Rs 1 00 000 and its current ratio was 2 1 After this the company pa...........

Current Assets of a Company were Rs 1,00,000 and its current ratio was 2 : 1. After this the company paid Rs25,000 to a Trade Payable. The Current Ratio after the payment will be :

5 : 1

2 : 1

3 : 1

4 : 1

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Explanation:

- Current Ratio: It's a measure of a company's ability to pay off its short-term liabilities with its short-term assets. A 2:1 ratio implies the company has twice as many current assets as current liabilities.

- Initial Situation: Current assets = Rs 1,00,000. Let current liabilities be Rs 50,000 (since 2:1 ratio).

- Transaction: Payment of Rs 25,000 to trade payable decreases both current assets and current liabilities by Rs 25,000 each.

- Post-Payment Calculation: New Current Assets = Rs 75,000. New Current Liabilities = Rs 25,000.

- New Current Ratio: 75,000 / 25,000 = 3:1.

- Correct Option: Option 3: 3 : 1.